Student Loan Update

1. Student Loan Update Midwest Association of Student Financial Aid Administrators October 20, 2009 Brett Lief, President National Council of Higher Education Loan Programs

4. Eligible Students College Costs Private Loans State Aid Home Equity Loans One Slide Presentation Students Costs Institutional Aid Payment Options

5. FFEL as we knew it in 2006 is gone. It will not return.The question is, “What will student loans look like in the future?”

6. Building a Foundation • Investigations by NY Attorney General Andrew Cuomo • Back-to-Back Budget Reconciliations • The Deficit Reduction Act of 2005 and the College Cost Reduction and Access Act of 2007 reallocated approximately $40 billion to increase Pell and other student aid funding

7. Building a Foundation • Deficit Reduction Act • Increased loan limits • New grant programs • Created College Access Initiative • College Cost Reduction & Access Act • Increased Pell Grant maximum to $5,400 over five years, e.g. cost of $11.4 billion • Financial markets disruptions interrupt all types of credit availability

8. The Results • All recent increases in federal student aid occurred without one new dollar

9. What does the Future Hold? • Greater reliance on federal funds • Federal goals could become school and state unfunded mandates • FAFSA simplification • Federal Direct Perkins Loans • Federal priorities impacting school and state priorities • Academic progress/graduation rates • Stimulus package fund usage • Implementation of the “Golden Rule” • Those who have the gold, rule!

10. What does the Future Hold? • Are schools on their own? • Who/what will fill the service vacuum? • Is navy blue the only color? • Will schools receive the support they need to serve their students? • Will transitions go smoothly? • Are schools ready for the unexpected?

11. Are schools on their own?A Year of FFELP Services • $60 billion in defaults averted in FY 08 • 10,000 financial aid/college nights • Over 1.4 million students and parents participated in financial aid/college nights • Over 26,0000 secondary school counselors trained • 14 million brochures published -- in multiple languages • 6 million phone call and email contacts • 62,000 financial aid administrators trained and 5,400 technical assistance visits NCHELP Survey, October 2009

12. Schools Speak Up • “How concerned are you about transitioning July 1, 2010?” • 68% of schools responded that they are “very concerned” or “extremely concerned” • 8.0% are “not concerned at all” • “What sort of impact do you anticipate loan program transition costs to have on your budget?” • 47% responded that the anticipated transition would have a “significant” or “severe” impact on their budget • 41% estimate that their staffing levels will be greater using the direct loan program • Best transition timeframe • 24% - July 1, 2010 • 51% - July 1, 2011 • 25% - July 1, 2012

13. National Association of Student Financial Aid Administrators National Association of State Treasurers Group letter from current and former presidents of national, regional and state student financial aid associations Letter from Former President’s of Historically Black Colleges President, United Negro College Fund College Auditor Letter, The Wesley Peachtree Group Arkansas Association of Student Financial Aid Administrators California Association of Student Financial Aid Administrators California Community Colleges Student Financial Aid Administrators Association Kansas Association of Student Financial Aid Administrators Kentucky Association of Student Financial Aid Administrators Louisiana Association of Student Financial Aid Administrators Mississippi Association of Student Financial Aid Administrators Missouri Association of Student Financial Aid Personnel Montana Association of Student Financial Aid Administrators North Carolina Association of Student Financial Aid Administrators New York State Financial Aid Administrators Association North Dakota Association of Financial Aid Administrators Pennsylvania Association of Student Financial Aid Administrators (two letters) Rhode Island Association of Student Financial Aid Administrators Southern Association of Student Financial Aid Association Tennessee Association of Student Financial Aid Administrators Texas Association of Student Financial Aid Administrators Virginia Association of Student Financial Aid Administrators Western Association of Student Financial Aid Administrators Wisconsin Association of Student Financial Aid Administrators Vermont Higher Education Council Vermont Commission on Higher Education Funding Schools Speak Up

14. Are schools ready for the unexpected? • Program Integrity Topics for Negotiated Rulemaking • Satisfactory academic progress • Monitoring grade point averages • Incentive compensation • Gainful employment in a recognized occupation • Definition of a high school diploma for purposes of eligibility for federal student aid • Misrepresentation of information provided to students and prospective students • Retaking coursework • Institutions required to take attendance for purposes of Title IV Funds requirements

15. The Legislative Process

16. House Higher Education Priorities –Student Aid and Fiscal Responsibility Act • Student Aid and Fiscal Responsibility Act • CBO “savings” of $87 billion • 100% federal Treasury funding of student loans by July 1, 2010 • No changes in loan amounts • Subsidized Stafford Loans variable rate after 7/1/2013 • T-Bill + 2.5%, capped at 6.8% • Revamping the Perkins Program • Mandatory Funds for Pell Grants • FAFSA Simplification • Funding for Community Colleges and other items • Approx. $10 billion for “deficit reduction” • Passed 253 to 171 on September 18th

17. House Higher Education Priorities –College Access & Completion Innovation Funds • Three Funds: • College Access Challenge Grant • State Innovation Completion Grants • Innovation in College Access and Completion National Activities • Focus is on Access & Retention • States are Primary Recipients • Schools & Non-Profits could have direct access to some funds

18. Senate Higher Education Priorities • HELP Committee Set to “Mark-Up” • Senate Floor Consideration is Next • Reconciliation or Regular Order? • 50 votes or 60 votes? • Significant Floor Amendments? • Reconciliation?

19. A Legislative Proposal Not Yet Considered

20. Proposal that Saves and Preserves School Choice and Services • Allows schools to choose a service provider, including loans originated as Direct Loans • Eliminates all differences in loan terms and conditions between FFEL and Direct loans on new loans • Allows for continued origination of loans by private non-profit lenders, albeit with required sale to ED

21. Proposal that Saves and Preserves School Choice and Services • Expands borrower assistance and advocacy through guarantors—includes default aversion and financial literacy • Requires servicer risk-sharing of 3 percent on loans that default during first four years of repayment • Sets aside 1/3 of college access and completion fund to support non-profits, guarantors and state agencies on financial literacy and similar outreach efforts

22. Proposal that Saves and Preserves School Choice and Services Benefits: • Equals the mandatory savings in the official budget score for H.R. 3221 • falls short over 10 years when discretionary spending associated with loans is considered • Eliminates school transition risk • Leaves much of current servicer infrastructure in place

23. Proposal that Saves and Preserves School Choice and Services The Goal is to Preserve: • Choice and competition • Services demanded by students and schools • 35,000 jobs that support a successful student loan experience

24. "Okay, you've convinced me. Now go out there and bring pressure on me."   President Franklin D. Roosevelt (In response to a business delegation)

25. Questions